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The following is an extract from S&P Global Market
Intelligence's latest Week Ahead Economic Preview. For the full
report, please click on the 'Download Full Report' link.
Central bank meetings, US May CPI and China data in focus
The week ahead finds central bank meetings
unfolding in the eurozone, Australia, India and
Thailand while a series of inflation data
will be in focus, particularly US CPI and consumer
confidence figures. China will also release
services PMI and inflation data alongside
trade numbers for May, which will be closely
scrutinised as the virus situation showed early signs of
improvements midway into the second quarter. Final Q1
GDP figures from the eurozone and Japan are also lined up
in the week ahead.
US Federal Reserve Governor Christopher Waller in his speech
this week struck a hawkish tone, highlighting his support for the
Fed to further tighten policy rates by 50 basis points for upcoming
meetings. This had reiterated the Fed's focus on inflation
following the Fed minutes release last week. Certainly, findings
from the latest PMI data showed US private sector expansion having
been weighed by inflationary pressures while global manufacturing
data reflected that supply constraints continued to exert upward
pressure on costs for manufacturers. This had also been flanked by
news of eurozone inflation hitting a record 8.1% in May, altogether
underpinning the hawkish bias for central bankers gathering in the
coming week, including the European Central Bank. Details for
concluding the ECB's large-scale asset purchases and plans for
raising rates at their July meetings are expected, making this one
to watch. In APAC, the RBA, RBI and BoT may also raise their policy
rates in reaction to recent inflationary trends.
Separately, in the data docket, US and China May inflation
numbers will be in focus. Any surprises on the upside may further
exert pressure on the market, especially with the consensus already
pointing to a month-on-month jump for headline CPI. China's
services PMI factory gate inflation will also be scrutinised amid
nascent signs of easing COVID-19 disruptions. Moreover, China's May
trade numbers will be one to watch after the sharp slowdown seen in
April. Other economies releasing CPI figures in the coming week
includes Taiwan, Thailand and the Philippines.
UK economy watchers will see the release of services and
construction PMI surveys.
Easing supplier delays take some heat out of inflation
An encouraging signal from the May PMI surveys was an easing in
the incidence of supplier delays reported in the US and Europe (see
special report). Although the indices of supply chain delays
generally remain worse than at any time prior to the pandemic,
supplier delivery times lengthened in May at the slowest rate since
January 2021 and October 2020 in the US and UK respectively, with
the eurozone reporting the second-smallest lengthening since the
start of 2021.
While tighter supply lines out of China were seen as the main
cause of a worsening of lead-times in Japan and to a lesser extent
in the rest of Asia, delivery delays also eased within mainland
China, which bodes well for production capacity.
With China set to relax some of its COVID-19 restrictions in
June, there is a likelihood of further improvements to the global
supply situation in the coming months, which could help drive
improved production gains around the world - and also take some of
the heat out of prices.
However, the flip side of looser virus restrictions in China on
the inflation picture will be reviving demand for many key raw
materials, which could fuel another upswing in global commodity
prices, notably including energy.
Key diary events
Monday 6 Jun South Korea, Switzerland, Norway, New Zealand Market
Holiday
Hong Kong S&P Global PMI* (May)
China (Mainland) Caixin Services PMI* (May)
Thailand CPI (May)
Tuesday 7 Jun
Japan All Household Spending (Apr)
Philippines CPI (May)
Australia RBA Cash Rate (Jun)
Germany Industrial Orders (Apr)
Taiwan CPI (May)
United Kingdom S&P Global / CIPS Services PMI* (May)
United States International Trade (Apr)
Canada Trade Balance (Apr)
Wednesday 8 Jun
South Korea GDP Growth (Q1, revised)
Japan Current Account (Apr)
Japan GDP (Q1, revised)
India Repo and Reverse Repo Rate (8 Jun)
Switzerland Unemployment Rate (May)
Germany Industrial Output (Apr)
United Kingdom Halifax House Prices* (May)
Norway Manufacturing Output (Apr)
Thailand 1-Day Repo Rate
Taiwan Trade (May)
United Kingdom S&P Global / CIPS Construction PMI* (May)
Eurozone GDP (Q1, revised)
United States Wholesale Inventories (Apr)
Thursday 9 Jun
United Kingdom RICS Housing Survey (May)
China (Mainland) Trade (May)
Eurozone ECB Deposit and Refinancing Rate (Jun)
United States Initial Jobless Claims
Friday 10 Jun
China (Mainland) CPI, PPI (May)
China (Mainland) M2, New Yuan Loans, Loan Growth (May)
Malaysia Industrial Output (Apr)
Norway CPI (May)
United States CPI (May)
Canada Capacity Utilization (Q1)
Canada Unemployment Rate (May)
Canada Manufacturing Sales (Apr)
United States UoM Sentiment (Jun, prelim)
* Press releases of indices produced by S&P Global and
relevant sponsors
can be found here.
What to watch
North America: May CPI, June UoM sentiment
Following the May US labour market report, the May CPI reading
will be hotly anticipated in the coming week. Refinitiv consensus
currently points to an acceleration of CPI to 0.7% in May from 0.3%
previously. This is in line with the
S&P Global Flash US Composite PMI indications, which
earlier pointed to further growth in cost burdens for private
sector firms that have been again passed on to clients at a rapid
pace. Given the Fed's focus on inflation, indications of worsening
price pressures may garner further attention and policy reactions.
As it is, the Fed has already indicated that more 50 basis points
hikes are on the table.
Separately, the preliminary June University of Michigan Consumer
Sentiment Index will be released next Friday with consensus
expectations suggesting improvements. As far as the flash PMI
future output index is concerned, private sector firms also
reported improved confidence in May.
Europe: ECB meeting, eurozone Q1 GDP and Germany
industrial orders
The ECB meets in the coming week against a backdrop of rising
inflationary pressures. The market will be looking for the ECB to
conclude their large-scale asset purchases and detail plans for
raising interest rates in July, making this one to watch.
The UK S&P Global / CIPS Services PMI will also be released
for May following the platinum jubilee weekend.
Asia-Pacific: RBA, RBI, BoT meetings, China trade and
inflation data, Japan Q1 GDP, Taiwan, Thailand, Philippines
CPI
Central bank meetings will be in abundance in the coming week
for APAC economies. The Reserve Bank of Australia, Reserve Bank of
India and the Bank of Thailand will all convene in the coming week
to update monetary policy with tightening of policy rates not ruled
out.
China's May trade, services PMI and inflation data will also be
in focus after manufacturing PMI data showed signs of the worst
being over with the recent COVID-19 lockdowns. A series of APAC CPI
figures will also be in focus amid concerns over supply constraint
issues which continued to plague the region.
Special reports
Global Factory Output Falls for Second Month in May Amid
China Lockdowns - Chris Williamson
Asia-Pacific Region Faces Rising Inflation
Pressures - Rajiv Biswas
Purchasing Managers' Index™ (PMI™) data are compiled by IHS Markit for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies, and are available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data are used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.
